Citibank China announced on Wednesday that it has received a domestic fund custody license from the China Securities Regulatory Commission (CSRC).
It is the first American bank to be granted such a license, which will enable the bank to provide custody-related services, such as holding securities, for mutual and private funds domiciled in China, after passing CSRC’s onsite inspection earlier this year, according to a statement by the bank.
Citi is the second foreign firm to be granted a fund custody license, after Standard Chartered Bank (China) gained a license in October 2018, according to CSRC records. Previously, the license was limited to local players.
Other foreign firms have also applied, including HSBC Bank (China) and Deutsche Bank (China), who are still waiting for approval from CSRC, according to the regulator’s website.
The decision to award Citi the license comes after China promised in the phase one trade deal with the US in January to “allow branches of US financial institutions to provide securities and investment fund custody services” to widen market access for foreign investors.
“This license is further validation of China’s commitment to continue to open up its financial markets,” Stuart Staley, head of markets and securities services at Citi Asia Pacific, said in the statement.
In anticipation of an influx of global financial institutions setting up in China, where the total assets managed in mutual funds, wealth management products and other schemes now reaches about $16trn, Citi has been investing heavily in its local custody, clearing and fund services capabilities, the statement noted.
Citi’s custody business has $14.5trn of assets globally, according to the bank’s website.
David Russell, Citi’s Apac head of securities services, added in the statement that the bank has increased investment in its securities services operations in Shanghai, and plans to build up it fund administration and other outsourcing services.
China has been making efforts to further open its financial markets. On 1 April, China officially lifted the investment limitation for foreign fund management firms with a mainland joint venture, allowing 100% ownership.
Several foreign asset managers have taken advantage of the new policy in different ways. For example, Blackrock received approval last week to set up China retail fund firm and JP Morgan Asset Management aims to buy out its mainland partner from their joint venture.